Georgia: Three Types of HOAs

by Stuart S. Gordan
McCalla Raymer, LLC -USFN Member (GA)

Homeowners associations in Georgia come in one of three different
forms. First, a condominium is organized in accordance with the Georgia
Condominium Act (GCA) codified at OCGA 44-3-70, et seq. Second,
an association may submit itself to be created and governed by the
Georgia Property Owners Association Act (POA) codified at OCGA 44-3-220,
et seq. Lastly, a homeowners association that did not opt-in to
the POA may be created by common law (HOA).

In all three instances, the associations have the right to lien
properties for non-payment of assessments, special assessments, dues,
fees, and/or charges. Associations subject to the GCA and POA enjoy the
benefits of an automatic statutory lien, and are not actually required
to file a paper lien with the land records of the county to protect
their rights. An HOA, though, is required to file and record a lien in
order to disclose to third parties that a specific property is
delinquent in its payment. However, one researching an HOA should be
certain to review the recorded covenants for the association and obtain
a payoff letter from the association’s representative. In most
instances, a first position security deed, or mortgage, takes priority
over an association lien, and often the association’s own recorded
covenants subject themselves to the first position security deed.

For properties subject to the GCA and POA, when the foreclosing
lender is the successful bidder at the foreclosure sale, then the lender
is responsible for paying a prorated portion of the annual assessments
for common expenses from the date of foreclosure to the date of the REO
closing. In addition, depending on the recorded covenants or board
resolutions, there may be additional special assessments or other
charges to be paid. Typically, assessments for foreclosed properties
have not been paid so, in addition, the associations are able to collect
up to a 10 percent late charge, a 10 percent annual interest charge on
unpaid assessments, plus the costs of collection including reasonable
attorneys’ fees.

For properties in an HOA, the REO seller is responsible for the
prorated portion of the annual assessments from the date of foreclosure
to the date of the REO closing, late charges, interest up to 18 percent,
and the costs of collection. Again, when a property has been foreclosed,
it is common for the former borrower to not have paid recent
assessments. And while the REO seller pays those dues that accrue after
the foreclosure date, the delinquent assessments from before the
foreclosure date are not paid by the foreclosing lender or the new REO
purchaser.

In Georgia, practically all properties subject to the GCA are
represented by management companies. Of those subject to the POA or
belonging to an HOA, there seems to be a mixed bag as to whether they
are represented by management companies or simply managed by resident
volunteers. But of the properties represented by management companies,
there certainly is a recent trend to collect as many fees as possible at
the REO closing from both the seller and the purchaser. These fees are
termed statement fee, letter fee, document preparation fee, transfer
fee, deed fee, initiation fee, capital contribution fee, foreclosure
fee, and so on. And while in the past each type of fee may have been
collected from either a purchaser or seller, many associations are
collecting these fees from both parties now. Further, even when the
association’s very own recorded covenants refer to or imply that a
fee, such as an initiation or a capital contribution, is to be collected
from an owner-occupant, now the fee is being charged to foreclosing
lenders as well.

An interesting side note related to those properties subject to the
POA: When preparing for an REO closing and requesting a payoff letter,
once a qualified written payoff request is made, the association or
representative management company has five business days to provide such
a payoff. The response is binding on the association, and the absence of
any reply relieves the REO seller of the responsibility to make
payment.